What is the Rolling Reserve and why does money end up in the Rolling Reserve?
Rolling Reserve is a financial mechanism used by banks and payment systems to protect against possible risks related to chargebacks, fraud or other unforeseen circumstances. Under this mechanism, a certain percentage of incoming payments is temporarily held in a special reserve account. These funds are not available for instant use and can be returned after a certain period of time, usually 90 to 180 days, provided no problems have occurred.
The money ends up in Rolling Reserve for several reasons:
High business risk: Banks and payment processors may consider your business risky if it is associated with an industry prone to frequent chargebacks or fraud. Such industries include online commerce, the gaming industry, international remittances, and other areas where the risk of financial loss is high.
New company: If your company has just started working with a payment processor or bank, they may want to back up and build a reserve to make sure your business is secure.
Frequent chargebacks and disputes: If your business has already experienced frequent chargebacks or customer disputes, the bank may increase the reserve percentage or extend the hold period.
How do I release funds from Rolling Reserve?
Understanding the terms of the reservation: Carefully review the terms of your contract with the payment processor or bank. Make sure you know exactly how long the funds are being held and the conditions under which they can be released.
Compliance and risk minimization: To reduce the risk of chargebacks and disputes, provide a high level of customer service and minimize problems with the quality of goods or services. The fewer disputes you have, the more likely you are to get a quick refund.
Regular account monitoring: Periodically check the status of your reserve account. This will allow you to keep track of receipts and realize when the end of your holdback period is approaching.
Contacting your bank or payment processor in a timely manner: At the end of the retention period, contact your bank or payment processor with a refund request. Prepare all necessary documents to make the refund process as quick and smooth as possible.
Prepare for possible delays: Sometimes the refund process may be delayed due to internal bank procedures or additional checks. Be prepared for such situations and be patient.
Rolling Reserve is an important tool for minimizing financial risks that can affect the availability of funds for your business. To avoid problems, it is important to understand the terms and conditions of the retention of funds and take steps to prevent disputes and chargebacks. Communicating with your bank or payment processor in a timely manner and complying with all terms of the agreement will help you successfully recover your funds at the end of the retention period.